Anaconda Copper Mining

Inv# MS1001
Stock

State(s):
Montana

Years:
1940's-50's

Color:
Bl, Gr

Mining Stock. Superb vignette of mining operation. Rare! Very nice! Scarce!!!
Anaconda Copper Mining Company
Anaconda Copper Mining Company (until 1915 known as the Amalgamated Copper Mining Company), one of the largest trusts of the early 20th century, owned all the mines on Butte Hill, Montana, USA. The Anaconda Company was purchased by Atlantic Richfield Company (ARCO) on January 12, 1977. At present (2007), Anaconda exists only as an environmental liability for BP, the current owner of ARCO.
Beginnings
Anaconda Copper Mining Company started in 1881 when Marcus Daly bought a small silver mine called Anaconda, near Butte, Montana. He asked George Hearst (father of publishing magnate William Randolph Hearst) for additional support, who agreed to buy one-fourth of the new company's stock without visiting the site. Huge deposits of another mineral, copper, were discovered soon and Daly became a copper magnate. Daly quietly bought up neighboring mines forming a mining company. He then built a smelter at Anaconda which he connected to Butte by a railway.
Butte, a small and poor town, became one of the most prosperous cities in the country, often called "the Richest Hill on Earth". From 1892 through 1903, the Anaconda mine was the largest copper-producing mine in the world. It produced more than $300 billion worth of metal in its lifetime.
The Rothschilds
In 1889 the Rothschilds attempted to control the world copper market. In 1892 the French Rothschilds began negotiations to buy the Anaconda mine. In mid-October 1895 the Rothschilds, French and British, bought one quarter of the stock in Anaconda for 7.5 million dollars. By the late 1890s the Rothschilds probably had control over the sale of about forty percent of the world’s copper production.
The Rockefellers
The Rothschilds role in Anaconda was brief. In 1899, Daly teamed up with two directors of Rockefeller’s Standard Oil to create the giant Amalgamated Copper Mining Company, one of the largest trusts of the early Twentieth Century.
By 1899 Amalgamated Copper acquired majority stock in the Anaconda Copper Company and the Rothschilds appear to have had no further role in the company. Marcus Daly had just become president of the seventy-five million-dollar holding company at his death in 1900.
The leading roles in the takeover were played by Henry Huttleston Rogers (John D. Rockefeller’s friend and a key man in his Standard Oil businesses) and William Rockefeller (John’s brother).They were aided by company promoter Thomas W. Lawson. Although Rogers and William Rockefeller were Standard Oil directors, Standard Oil itself did not take part, nor did its founder and head, John D. Rockefeller, who disliked such stock promotions.
Rogers, Lawson, and William Rockefeller acquired Anaconda – the company worth millions – without the expenditure of a single dollar of their own.
This is how they did it:
1. Rogers and William Rockefeller took title to the mine properties, giving to Marcus Daly a check on the National City Bank of New York for $39 million, with the understanding that the check was to be deposited in the bank and remain there for a definite time (National City Bank was closely associated with the Rockefeller family's business dealings).
2. Rogers and Rockefeller then set up a paper organization known as the Amalgamated Copper Company, with their own clerks as dummy directors, and transferred all the mines to Amalgamated for $75,000,000 in Amalgamated capital stock.
3. From the National City Bank, Rogers and Rockefeller borrowed $39 million to cover the check they had given to Marcus Daly, using the $75 million in Amalgamated stock as collateral for the loan.
4. They sold one-third of Amalgamated stock on the market for twice the amount they had paid Daly.
5. With the proceeds, they retired the $39 million loan from the National City Bank, and pocketed nearly $40 million as their own profit on the deal.
Lawson later had a falling out with Rogers and Rockefeller, and wrote of the experience in a book Frenzied Finance. Although not totally objective (probably due to Lawson's bitterness) it offered an exceptional insight into aspects of the world of high finance in that era which most people never see. During the same period, Ida M. Tarbell wrote a more extensive and famous expose of Standard Oil). Publicity from revelations such as these fueled public sentiment for controls which led to U.S. anti-trust laws such as those championed by President Theodore Roosevelt.
Amalgamated competes in copper
At the beginning of the 1900s, due to electrification (and Amalgamated's maintenance of an artificially high copper price), copper was very profitable, and copper mining expanded rapidly. Between 1899 and 1915, Anaconda, controlled by Standard Oil insiders, stayed under the name of Amalgamated Copper Company.
Amalgamated was in conflict with powerful copper king F. Augustus Heinze, who also owned mines in Butte which in 1902 he consolidated as the United Copper Company. Thus, neither organization was able to monopolize copper extraction in Montana. In addition, although Butte was then the most prolific copper-mining district in the world, Amalgamated could not control other copper-mining districts, such as those in Michigan, Arizona, and countries outside the United States.
Monopolies were a key to great wealth and in the regard. Marcus Daley died in 1900, and his widow began a close friendship with a shrewd, intelligent businessman, John D. Ryan, who assumed the presidency of Daly's bank and manager of the widow's fortune. The leaders of Amalgamated turned for help Ryan, famous for his negotiation skills, for help in creating a monopoly at Butte.
Ryan convinced Heinze to walk away with abundant compensation, and took over Heinze's properties and the properties of William A. Clark (Butte’s third copper king). The Rockefellers were then able to gain complete control of Butte's copper as they merged them all with Amalgamated. The reorganized company was again named Anaconda. Ryan became its president, and was rewarded with significant package of Amalgamated shares.
The "right hand" of John Ryan was Cornelius Kelley, young attorney, who soon was given the position of vice-president.
Henry Rogers died suddenly in 1909 of a stroke, but William Rockefeller brought in his son Percy Rockefeller to help with leadership.
[edit] The golden twenties
During the 20's metal prices went up and mining activity increased. Those were really the golden years for Anaconda. The company was managed by dexterous Ryan-Kelley team and was growing fast, expanding into new areas of activity: manganese, zinc, aluminum, uranium and silver.
In 1922 the company acquired mining operations in Chile and Mexico. The mining operation in Chile (Chuquicamata), which cost Anaconda $77 million, was the largest copper mine in the world. Then it was the source of two-thirds to three-fourths of the Anaconda Company's profits.
The same year ACM purchased American Brass Company, the nation's largest brass fabricator and a major consumer of copper and zinc. In 1926 Anaconda acquired the Giesche company, a large mining and industrial firm, operating in the Upper Silesia region of Poland.
At that time Anaconda was the fourth largest company in the world. These heady times, however, were short-lived.
Great speculation
In 1928 Ryan and Percy Rockefeller aggressively speculated on Anaconda shares, causing them to go up at first (when they sold) and then to go down (when they buy them back). Known today as a "pump and dump", at the time it was not illegal, and was actually quite common. The prices, under the pressure of a "joint account" set up by Ryan and Rockefeller of nearly a million and a half shares of Anaconda Copper Company, fluctuated from $40 in December, 1928 to $128 in March 1929.
Smaller investors were completely wiped out. The results are still considered one of the great fleecings in Wall Street history. The American Senate hearings concluded that those operations cost the public, at the very least, $150 million. A 1933 Senate banking committee called these operations the greatest frauds in American banking history and a leading cause of the 1930s depression.
Great Depression
In 1929 Anaconda Copper Mining Co. issued new stock and used some of the money to buy shares of speculative companies. When the market crashed on Oct. 29, 1929, Anaconda suffered serious financial setbacks. Moreover, at the same time, copper prices started going down dramatically. During the winter of 1932-33 copper prices had dropped to $0.103 per kg, down from an average of $0.295 per kg only two years earlier.
The Great Depression took its toll with massive unemployment in both the United States and Chile (up to 66 percent unemployment rate in the Chilean mines). On March 26 1931, Anaconda cut its dividend rate 40%. John D. Ryan died in 1933 and was buried in a copper coffin. His mighty Anaconda shares, once worth $175 each, had dropped to $4 at the bottom of the Great Depression. Cornelius Kelley became the Chairman in 1940.
Beginning of WWII
The victory labor-management production committee of the Butte mines, September 1942. In the back row from left to right are: J.A. Livingston, Anacoda Copper Mining Company; E.I. Renouard, assistant general superintendent, ACM; H.J. Rahilly, assistant general superintendent, ACM; Charles Black, Butte miners' union; John Downs, boiler makers' union; W.J. McMahon, commissioner of labor of ACM; John F. Bird, electricians' union; J.P. Ryan, foreman of ACM; Ira Steck, superintendent, electrical department of ACM; James Cusick, machinists' union; John J. Mickelson, Butte miners' union; Eugene Hogan, superintendent ACM. In the front row reading from left to right are: S.S. McGlone, general superintendednt, ACM; Bert Riley, Butte miners' union; Dennis McCarthy, Butte miners' union; A.C. Gibley, ACM; Carl Stenberg, painters' union; John Eathorne, foreman of ACM; John Gaffney, carpenters' union. Butte mining, like most U.S. industry, remained in depression until the dawn of World War II, when the demand for war materials greatly increased the need for copper, zinc, and manganese. That relieved some of the economic tensions.
The end of World War II brought another downturn in the copper industry.
The 1950s
During post-war years prices of copper dropped. At the same time mining costs had risen precipitously. As a result, copper production from Butte's underground vein mines dropped to only 45,000 mt annually. Clearly, something had to be done if mining were to continue to prosper in the Butte district. The answer was called the "Greater Butte Project" (GBP). The project would exploit lower-grade underground reserves by the block-caving method. The new method was successful, although short-lived.
In 1956 Anaconda netted the largest annual income in its history: $111.5 million. But since then ore grades were continuing their decline, mining costs were rising each year, and profits were diminishing. To stay alive, the company switched to open-pit mining, a very area-consuming method. The Berkeley Pit kept expanding and ate away at the older parts of Butte.
The 1970s
In 1971, Chile's newly elected Socialist president, Salvador Allende, confiscated the Chuquicamata mine from Anaconda. Anaconda lost two-thirds of its copper production. Two years later, a compensation of $250,000,000 was paid to Anaconda by the Chilean government, after the military overthrow of Allende in September 1973.
Losses from the Chilean takeover, however, had seriously weakened the company's financial position. Later in 1971, Anaconda's Mexican copper mine Compañía Minera de Cananea, S.A. was nationalized by president Luis Echeverría Álvarez's government. An unwise investment in the unsuccessful Twin Buttes mine in southern Arizona further weakened the company, and in 1977 Anaconda was sold to Atlantic Richfield Company (ARCO) for $700,000,000. However, the purchase turned out to be a regrettable decision for ARCO. Lack of experience with hard-rock mining, and a sudden drop in the price of copper to sixty-odd cents a pound, the lowest in years, caused ARCO to suspend all operations in Butte.
By 1983, six years after acquiring rights to the "Richest Hill on Earth," the Berkeley Pit was completely idle. Market experts wonder why this acquisition took place at all.[citation needed] Perhaps the investors were looking for huge tax write offs, as Anaconda had a significant loss after Chilean vest (a net loss of $375.3 million). ARCO founder, Robert Orville Anderson, stated "he hoped Anaconda's resources and expertise would help him launch a major shale-oil venture, but that the world oil glut and the declining price of petroleum made shale oil moot." [2] At the time of the sale to ARCO, Anaconda had large working hard coal holdings in the Black Thunder mine at Thunder Basin, Wyoming. ARCO planned to diversify its energy business into coal. In June 1998, Arch Coal completed the acquisition of the coal assets of Atlantic Richfield.
Closing down the mines was not the end of new owner’s problems…
Superfund site
The area of Butte, Montana, Anaconda, Montana, and the Clark Fork River were highly contaminated. Milling and smelting produced wastes with high concentrations of arsenic, as well as copper, cadmium, lead, zinc, and other heavy metals. That’s why, beginning in 1980s, the Environmental Protection Agency designated the Upper Clark Fork river basin and many associated areas as Superfund sites - the nation's largest.
The EPA named ARCO as the "potentially responsible party." Atlantic Richfield Company was obliged to remediate (clean up) the area. Since then, Atlantic Richfield has spent hundreds of millions of dollars decontaminating and rehabilitating the area, though the job is far from finished.
ARCO, officially BP West Coast Products LLC, is now a subsidiary of BP